ABSTRACT The purpose of this study is to provide evidence of the impact of civil liberties and political rights on corporate innovation, through the lens of institutional theory. Moreover, the research also analyses the moderating role of the CSR committee in the relationships between civil liberties and innovation, and political rights and innovation. The sample consisted of 13,235 international firm‐year observations from 2012 to 2022, including 36 countries and nine industries. The proposed model in this research is estimated using the generalised method of moments (GMM), which addresses potential endogeneity and unobserved heterogeneity in panel data. The findings show that a positive association exists between civil liberties and political rights, respectively, and innovation. The results also show that CSR committees positively moderate the relationship between political rights and innovation, but not the relationship between civil liberties and innovation. The study is the first to examine the moderating role of CSR committees in these relationships, addressing a gap in the literature on institutional theory and corporate governance. From a policy point of view, the findings suggest that policy‐makers looking to promote innovation should enhance democratic institutions and safeguard political and civil liberties, since these contexts allow businesses to innovate more successfully. Furthermore, regulators and governments should promote the formation and strengthening of CSR committees, as these governance structures can improve the innovative outputs of companies functioning in environments with strong political rights.
Álvarez et al. (Thu,) studied this question.